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Waving a white flag … Samuelson and Global Warming

Robert J. Samuelson simply doesn’t believe in America, in American ingenuity, in Americans ability to rise to challenges and solve problems.

From an acquaintance,

This week’s Newsweek magazine carries a column by Robert Samuelson, titled Just-Call It Cap-and-Tax. Samuelson likes to say he’s not an economist. In this column, he certainly showed that to be the case.

Join me after a fold for a stroll through some of Samuelson’s reckless truthiness.

Okay, thank you, Samuelson has provided a central target to focus to enable a decent world for America, American prosperity, and Americans for the decades and centuries to come.

So, the simplest way to stop these emissions is to regulate them out of existence.

Yeah, those stupid environmentalists. They think that they can, with a magic wave of a wand, recreate a reality and pop the problem goes away. What crap. The reality is that, in a whole host of ways, the regulatory environment favors (fiscally and otherwise) polluting industries.

Not least of the subsidies: “external costs”. Polluters do not need to pay a penny for the privliege of poisoning others. Mercury in the oceans ending up in tuna so that pregnant women shouldn’t eat tuna? Say thank you to burning coal (for electricity and otherwise). Acidification of the oceans? Thank you to burning of fossil fuels. Diesel pollution harming public health? Global Warming damage? Etc … All of these are “external” to the calculus. Regulatory reform (such as through global warming legislation) will begin to change this equation, to make “total ownership cost” for society more accurately reflected in the price that sellers have to charge and buyers need to pay. Right now, we are all subsidizing inefficient, polluting energy practices with our health and the health of our children.

Anyone want to bet that Samuelson discusses this in any serious way in any of his columns? If so, please send me a check because this is an issue external to Samuelson’s thinking.

Naturally, that’s what cap-and-trade does. Companies could emit greenhouse gases only if they had annual “allowances” — quotas — issued by the government. The allowances would gradually decline. That’s the “cap.” Companies (utilities, oil refineries) that needed extra allowances could buy them from companies willing to sell. That’s the “trade.”

This is a basically fair description of how cap-and-trade would work. “Allowances”, of course, are a bad approach, they should not be granted out without charge. Everyone should have to pay a price for the privilege of poisoning your children and mine.

In one bill, the 2030 cap on greenhouse gases would be 35 percent below the 2005 level and 44 percent below the level projected without any restrictions. By 2050, U.S. greenhouse gases would be rapidly vanishing.

Okay, this is an exaggerated statement as to Lieberman-Warner’s impact. I do not support Lieberman-Warner it doesn’t do enough and it is not well structured.

Even better, their disappearance would allegedly be painless. Reviewing five economic models, the Environmental Defense Fund asserts that the cuts can be achieved “without significant adverse consequences to the economy.” Fuel prices would rise, but because people would use less energy, the impact on household budgets would be modest.

Forget “without adverse consequences,” a well structured program would have positive impacts through reducing imports of oil, reducing our dependency on the futureless fossil fuel system (want to bet on the price of gasoline a decade from now without massive change for the better in energy policy and practices?), reducing health impacts from fossil fuel, greater efficiency throughout the system via capital investment to reduce fuel use, green jobs, etc … There is a real win-win-win-lose opportunity here. A win for the average person who will have better health. A win for America and the American economy with lower pollution, better jobs, more exports, and less money being spent with each passing day on energy imports. And, well, there is a lose: without adaptation, those who are profiteering on America’s addiction to fossil fuels (like Peabody Coal and Exxon-Mobil) will see their profits lowered. Hmmm … perhaps there is a reason that there is $10s of millions going into fighting any attempt to do global warming/climate change legislation, even the utterly inadequate Lieberman-Warner Climate inSecurity Act.

This is mostly make-believe.

J’accuse, Robert Samuelson, J’Accuse. You are fostering an environment for reckless endangerment of the future prospects of Americans and America. You are an active collaborator in efforts to undermine our security, our economy, our health, our nation.

This is false.

If we suppress emissions, we also suppress today’s energy sources, and because the economy needs energy, we suppress the economy. The models magically assume smooth transitions. If coal is reduced, then conservation or non-fossil-fuel sources will take its place. But in the real world, if coal-fired power plants are canceled (as many were last year), wind or nuclear won’t automatically substitute. If the supply of electricity doesn’t keep pace with demand, brownouts or blackouts will result. The models don’t predict real-world consequences. Of course, they didn’t forecast $135-a-barrel oil.

“Models [DO NOT] magically assume smooth transitions.”

The system creates an incentive, by making the true costs of different power options (including negawatts) part of the calculation, to move toward less use of energy and a preference to cleaner forms of energy.

No climate change legislation anywhere near serious consideration considers a magical on-off switch of a sudden change from our currently inefficent and polluting energy system to something magically clean. No, it creates incentives for the emergence of those “substitutes” that you deride. It would foster development of a smart grid that would greatly reduce the likelihood of brown/blackouts compared to today’s system while lowering pollution. And, energy efficiency reducing demand almost certainly is more likely to improve the electrical system’s performance rather than degrade it.

And, the creation of a cost for polluting would unleash innovation and the American business community to the opportunities to be had from ever-greater energy efficiency and ever-cleaner energy systems. Not only would this transform the air we breathe and water we drink, but it could create a renaissance in the US industrial economy, including the potential for exporting to a world economy desperate for better energy systems.

Quite simply, Samuelson utterly ignores (not just here, but all his tripe relative to our energy and global warming challenges) the transformative power of technological change. Evidently, Samuelson doesn’t believe that there is such a thing as American ingenuity.

By the way, so, because we have $135-a-barrel oil, it seems, we should not be doing anything to reduce our usage of it? According to Samuelson, it seems, perhaps we should wait for $200 a barrel oil?

As emission cuts deepened, the danger of disruptions would mount. Population increases alone raise energy demand. From 2006 to 2030, the U.S. population will grow 22 percent (to 366 million) and the number of housing units 25 percent (to 141 million), the Energy Information Administration projects. The idea that higher fuel prices will be offset mostly by lower consumption is, at best, optimistic.

Over the past 30 years, Californians have seen their cost per kilowatt hour (kwh) increase, even significantly, in comparison with Texans. However, California government policy has focused on energy efficiency. The average Californian has remained flat in energy use while the Texan (and other Americans) have seen a 60+% growth in electricity use. Want to guess who has seen the higher increase in their monthly energy costs? Hint: it isn’t the one who pays more for electricity.

The Congressional Budget Office has estimated that a 15 percent cut of emissions would raise average household energy costs by almost $1,300 a year.

First, this analysis was constrained and that $1300 is being stated in isolation. The analytical constraints and constructs drove an inflated price. A few change assumptions and that increase becomes decreased cost/increased value. Want to talk about an improved economy with green jobs? How much is improved health worth? Etc …

An NRDC analysis shows something quite different. The NRDC report found the average yearly household fuel bill in 2020 is likely to be up to $530 lower and in 2030 is likely to be $590 lower. The lower total fuel bill is primarily a result of higher fuel efficiency and greater use of alternative fuels that more than fully offset any higher fuel prices that would result from the law.

That’s how cap-and-trade would tax most Americans. As “allowances” became scarcer, their price would rise, and the extra cost would be passed along to customers.

Would they be passed on? Perhaps. The total cost of carbon would not increase, as cleaner forms of energy offset dirty poisoning energy sources and energy efficiency reduces demand. “Total” cost of carbon might not increase much, even if the cost for the right to emit each ton of poison increases.

Meanwhile, government would expand enormously. It could sell the allowances and spend the proceeds; or it could give them away, providing a windfall to recipients. The Senate proposal does both to the tune of about $1 trillion from 2012 to 2018. Beneficiaries would include farmers, Indian tribes, new technology companies, utilities and states. Call this “environmental pork,” and it would just be a start. The program’s potential to confer subsidies and preferential treatment would stimulate a lobbying frenzy. Think of today’s farm programs — and multiply by 10.

This is somewhat amusing and shows the power of the coordinated message. Oh, no, a Cap-and-Trade would increase lobbying. All of a sudden conservative pundits like Samuelson and will-fully ignorant George Will are concerned about lobbying reforms and impacts.

Unless we find cost-effective ways of reducing the role of fossil fuels, a cap-and-trade system will ultimately break down. It wouldn’t permit satisfactory economic growth.

This is basically true.

But if we’re going to try to stimulate new technologies through price, let’s do it honestly.

A straightforward tax on carbon would favor alternative fuels and conservation just as much as cap-and-trade but without the rigid emission limits. A tax is more visible and understandable. If environmentalists still prefer an allowance system, let’s call it by its proper name: cap-and-tax.

To a certain extent, Samuelson is right. The same Congressional Budget Office (CBO) finds that a tax would be more efficient, in pure economic terms, than a cap program. And, in fact, I support a mix of fee and cap: a Global Warming Impact Fee. A fee provides some certainty as to revenue, a cap some certainty as to minimum reductions in pollution, a combination might be the best approach.

But, Samuelson isn’t raising this out of any desire for an honest discussion, an honest debate. He is interested in raising the temperature of the conversation, of getting people’s blood boiling, by invoking a third rail of American politics: TAX! And, as per almost all conservative invocations of “tax and spend”, he screams TAX while drowning out even a whisper of a conversation about benefits. Benefits of better jobs. Benefits of improved health. Benefits of an improved economy. Benefits of improved security. Benefits of reduced risk. Benefits that merit being screamed from the rooftops.

Sigh …

Robert J. Samuelson believes that we should simply roll over and play dead (die) in face of the greatest challenge of the century.

It is easy to imagine Samuelson on 8 December 1941:

He would have been one of the few waving a white flag in the face of Japanese and Nazi aggression.

[…] in OPED after OPED from people like George (will-ful deceit) Will, Bjorn Lomborg, Sarah Palin, Robert Samuelson, Dana Milbank, and others. While The Post editorial board seems comfortable with a “faux and […]